HireCentrix News Updates
Does unfettered crowd funding and initial public stock offerings open the door to investment fraud? In the immortal words of philosopher Sarah Palin, “you betcha.”
While it sounds like one of those online innovations that may make capital available to a larger number of people, crowd funding could make the boiler room scams of the 1980s look like mere parking violations.
This new concept, which would allow start-up companies to go directly to investors on the internet with little or no regulation or disclosure, is contained in the JOBS Act working its way through Congress. There are also changes to Regulation A and D in securities laws that would imperil investors. Most of the worst language is in the House version of the bill.
Regulators, understandably, abhor the idea of deregulating this process.
Does anyone remember mortgage security derivatives and credit-default swaps? They were virtual licenses to print money for Wall Street. Yet those products had some regulation and oversight and authorities still missed one of the biggest scams of all time when it all melted down in 2007-2008, socked American taxpayers with a multi-trillion dollar bill and vaporized some 10 million jobs.
Now comes the opportunity to raise money with almost no strings attached. A casino-like money bazaar would enter cyberspace, but no watchdogs would be around to sniff out these deals.
How bad is this legislation? Let me count the ways, starting with state securities regulators as represented by the North American Securities Administrators Association (NASAA). This is from Jack Herstein, president of NASAA, on the House vote to approve the JOBS act:
See also http://www.washingtonpost.com/business/economy/jobs-act-could-open-a-door-to-investment-fraud-sec-chief-says/2012/03/14/gIQA1vx1BS_story.html -JOBS Act could remove investor protections, SEC chief warns
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